ANNUAL REPORT 2012 Are
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ANNUAL 2012 REPORT www.ote.gr 99, Kifissias Ave.,15124 Maroussi,Athens, Greece Organization S.A. Hellenic Telecommunications This document has been printed on environmentally friendly, high - quality paper with the following composition: 40% recycled paper, 55% FSC - certified paper pulp (certificate of sustainable forest management) and 5% cotton fibres to improve paper texture and appearance. It is eco label - compliant, adhering to all environmental management ISO standards as well as the relevant ISO standard for reduced carbon dioxide (CO2) generation and emissions during manufacturing. It features neutral ph; it is free of heavy metals and is non-chlorinated to avoid contamination of water, the ground water table and the sea. It is durable but also fully self degradable and recyclable. WHO WE ANNUAL REPORT 2012 ARE 4 ORGANIZATIONAL STRUCTURE ΟΤΕ ΑΕ Greece COSMOTE RomTelecom OTE GLOBE 100% 54% 100% Greece Romania Greece OTESat - AMC Globul* 97% 100% 94% Maritel Albania Bulgaria Greece Zapp COSMOTE OTE estate 70% Romania 100% Romania 30% 100% Greece OTE Plus Germanos* 100% 100% S.E. Europe Greece OTE 100% Academy Greece CosmoONE 62% Fixed-line Telephony Greece Mobile Telephony Other Operations * In April 26, 2013 OTE announced the signing of an agreement to sell its 100% stake in Cosmo Bulgaria Mobile EAD (Globe) and Germanos Telecom Bulgariα (Germanos). WHAT WE DO 5 GREECE Fixed-line and Mobile Telephony Fixed-line subscribers: 3,126,272 Broadband subscribers: 1,204,980 TV subscribers (OTE TV through Satellite and through Conn-x): 119,771 Mobile telephony subscribers: 7,697,322 ROMANIA Fixed-line and Mobile Telephony Fixed-line subscribers: 2,329,042 Broadband subscribers: 1,196,561 TV subscribers: 1,265,325 Mobile telephony subscribers: 6,285,830 BULGARIA Mobile Telephony Mobile telephony subscribers: 4,518,191 ALBANIA Mobile Telephony Mobile telephony subscribers: 1,874,221 WHERE ANNUAL REPORT 2012 WE DO IT 6 ΟΤΕ GROUP Greece Αlbania Romania Bulgaria HOW WE ARE DOING 7 01. ProForma EBITDA* (€mn) 1,919.4 1,731.8 1,656.9 2010 2011 2012 *Excluding impact of Voluntary Retirement Programmes and Restructuring Plans 02. Earnings per Share (€) 0.97 0.24 0.08 2010 2011 2012 03. Net Operating Cash Flow* (€ mn) 1,315.4 1,322.1 1,313.3 2010 2011 2012 *Excluding Voluntary Exit Programmes and/or Spectrum payments 04. Adjusted Free Cash Flow * (€ mn) 819.1 703.9 572.9 2010 2011 2012 *Excluding Voluntary Exit Programmes and/or Spectrum payments HOW WE ANNUAL REPORT 2012 ARE DOING 8 05. Total CAPEX as % of Revenues 13.7% 14.2% 11.8% 0.2% 2.0% 1.3% 13.5% 12.3% 10.6% 2010 2011 2012 Spectrum Payments as % of Revenues Adjusted CAPEX* as % of Revenues *Excluding Spectrum Payments 06. OTE GROUP Net Debt (€ mn ) Dec 31, 2012 Dec 31, 2011 +/- % Short Term : - Bank loans 1.4 2.0 -30.0% Medium & Long - term: - Bonds 3,010.0 3,244.9 -7.2% - Bank loans 1,039.4 1,655.1 -37.2% Total Indebteness 4,050.8 4,902.0 -17.4% Cash and Cash equiv. 1,161.6 683.4 +70.0% Net Dept 2,889.2 4,218.6 -31.5% Other financial assets 6.7 353.5 -98.1% Underlying Net Dept 2,882.5 3,865.1 -25.4% 07. Underlying Net Debt (€ mn ) 4,283.0 3,865.1 2,882.5 2010 2011 2012 08. Adjusted Net Debt to Pro forma EBITDA 2.2x 2.2x 1.7x 2010 2011 2012 9 09. Geographical Distribution of Revenues 2012 10. Pro forma EBITDA 2012 Geographical Distribution* (Before Eliminations) (Before Eliminations) Other Countries 29,6% Other Countries 27,1% Greece Greece 70,4% 72,9% *Excluding impact of Voluntary Retirement Programmes and Restructuring Plans 11. Revenues Breakdown 2012 12. Pro forma EBITDA Breakdown 2012* (Before Eliminations) OTE OTE 33.8% 30.1% COSMOTE COSMOTE 48.8% 53.7% Other Other 4.7% 6.1% RomTelecom RomTelecom 10.0% 12.8% *Excluding impact of Voluntary Retirement Programmes and Restructuring Plans 13. ΟΤΕ S.A. Employees Evolution 10,925 10,569 8,750 2010 2011 2012 14. OTE Fixed Line Connections (000) 3,857 3,431 3,126 2010 2011 2012 HOW WE ANNUAL REPORT 2012 ARE DOING 10 15. RomTelecom Fixed Line Connections (000) 2,622 2,490 2,329 2010 2011 2012 16. OTE Retail Broadband Subscribers (000) 1,179 1,112 1,097 2010 2011 2012 17. RomTelecom Broadband Subscribers (000) 1,136 1,197 1,013 2010 2011 2012 18. OTE Group MobileTelephony Subscribers (000) 20,785 20,467 20,376 2010 2011 2012 11 HOW WE ANNUAL REPORT 2012 DO IT 12 OUR STRATEGY The Management’s target is to transform OTE into a high performance company. Specifically, the company aspires to: – Become the leading provider of broadband, ICT and Pay-TV services in Greece – Deliver best-in-class services to its customers – Offer its customers a top quality experience – Become the best employer in Greece, advance its personnel and attract highly talented employees – Enhance the value generated for its shareholders In order to attain these goals, the company has begun implementing a far- reaching transformation program, a large part of which was realized in 2012. MAIN ACHIEVEMENTS OF THE TRANSFORMATION PROGRAMME IN 2012 The transformation programme is constructed around 8 basic pillars. The main achievements per pillar are the following: 1. Customer Experience Realization of over 45 trans-departmental projects aimed at improving the entire customer lifecycle 2. Products & Services – Especially successful launching of new broadband programmes – Significant upgrading of the content and services of ΟΤΕ TV – Enhancement of the ICT/System Integration’s market share 3. Cost Reduction Over-attainment of goals set regarding the reduction of operational costς 4. Operations Optimization – Radical reorganization of OTE’s technical services, with a concurrent realization of the Workforce Management automated system in regard to 2,700 employees – Optimization of basic procedures in key areas of operation (Customer Service, Procurement, Personnel, Technical Support, IT, etc.) 5. Human Resources – Successful implementation of voluntary retirement programmes for about 1,500 employees, which resulted in a significant reduction in operational costs – Realization of a personnel evaluation system 6. Next Generation Access Successful launching of new generation VDSL services at competitive prices 7. Regulation Decisive contribution to the successful launchings of Broadband and VDSL 13 8. Group Synergies – Creation of a single management team for ΟΤΕ-COSMOTE and consolidation of the majority of units on an operational level, so as to maximize synergies – Active participation and realization of synergies within the DT Group. Based on these achievements, the company has managed, through coordinated commercial actions, to regain its competitiveness in 2012 and to attain major goals, such as: – Reducing by 50% the net losses of voice connections to the competition – Attracting about 40% of the broadband market’s net additions – Doubling its TV services customer base – Significantly enhancing the indexes regarding customer satisfaction and loyalty MAIN DIRECTIONS OF THE TRANSFORMATION PROGRAMME FOR 2013 The strategic transformation programme will continue into 2013 with a set of actions regarding all pillars. At the same time, emphasis during this year will be placed on realizing the most of synergies (both on the level of the OTE Group and the DT Group), as well as on the simplification of structures and procedures. The main sectors of the 2013 programme are: 1. Customer Experience and Commercial Effectiveness – Continuing the programme for the improvement of Customer Experience, while at the same time restructuring internal processes and procedures, especially in terms of sales, in order to maximize the ΟΤΕ-COSMOTE synergies – Emphasizing the B2B sector (companies, businesses), as well as the developing markets (TV, ICT, Internet Services) 2. Optimizing Efficiency Emphasizing the simplification and automation of procedures, as well as the synergies that arise from the common use of supportive functions within the OTE Group, while at the same time continuing the transformation of OTE’s technical services. 3. Human Resources Ensuring the company’s smooth operation, despite the extent of the voluntary retirement program; simplifying the human resources management procedures; and at the same time reinforcing the organizational behavior which is based on efficiency. 4. Cost Containment Extensive programmes towards reducing operational costs, while also taking advantage of the DT Group’s experience. 5. Regulation Constant monitoring of the regulatory environment and timely interventions in order to ensure the company’s interests. 6. New Generation Access (NGA) Expansion of VDSL coverage and draft of a mid/longterm plan for the launching of new generation services and technologies, with an aim to more efficiently meet customer needs, to enhance the company’s competitiveness, and to reduce operational costs. 7. Group Synergies Enhancing all synergies within the OTE and DT Groups, on a commercial level as well as regarding matters of optimization and efficiency. WHAT ANNUAL REPORT 2012 HAPPENED IN 2012 14 AGREEMENTS, DISPOSALS, ORGANIZATIONAL CHANGES AND OTHER CORPORATE EVENTS In January the sale of OTE’s 20% entire stake in Telecom Serbia is completed. OTE received €397mn in total, €380mn from the share transaction and €17mn for the dividend of fiscal year 2011, according to the Share Purchase Agreement that had been signed in December 2011 in Athens. In June OTE secures an important agreement with Inmarsat, the leading provider of global mobile satellite communications services, for the provision of its forthcoming Global Xpress™ services. Following an international tender involving major telecommunications providers and earth gateways throughout Europe, OTE has been selected to establish and manage a satellite access station (SAS) for the Global Xpress service in Nemea, Greece. GX services will provide mobile users with true broadband speeds of up to 50Mbps and will be delivered via three Inmarsat-5 (I-5) satellites, launching from mid-2013.